Labor costs are among the most expensive for retailer owners. Therefore, effectively managing your payroll budget to provide necessary sales and service support in an efficient way is an important concern. Typically, retailers want to maintain a payroll ratio of 10 to 15 percent of gross sales, though this varies by industry and product types.

Floor Coverage

A key payroll factor in a retail business is having adequate employees to cover the sales floor and checkout locations. Software programs are often used to determine how much coverage is needed based on typical sales volume. Over time, you can analyze daily and weekly sales volumes and trends to assess how many sales and service employees are necessary to meet the demands of customers.

Scheduling Software

You can also select from an array of retail scheduling software programs that aid in planning retail schedules. In fact, some software programs combine volume and labor analysis with scheduling functionality. Typically, a program shows how many employees should work in the store or in given departments at every hour of the day. This is usually shown with bar graphs that you can use to assign work shifts to given employees.

Under or Over

A key strategic decision in payroll is whether to intentionally schedule for more or fewer hours than your software program dictates. Some retailers prefer to schedule 5 to 10 percent fewer work hours. This protects against overspending if a week is slower than anticipated. You may have to call in extra workers if you end up short-staffed on a given day. Other retailers schedule at or slightly above projected need. In this case, you are more likely to ensure adequate floor coverage. This approach puts pressure on managers to send part-time workers home if business is slow on a given day.

Other Insights

Avoiding overtime is a common technique retailers use to avoid excess payroll expenditures. A large part-time staff and effective schedule planning helps. Additionally, retailers often find that hiring higher-caliber workers and paying them slightly more per hour is a benefit to payroll. In some cases, specialized or motivated workers complete the same amount of work as two or three less capable or less motivated workers. While you might have to pay more for top employees, you could end up saving on payroll with lower coverage requirements.

References

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.